Edited version of private advice

Authorisation Number: 1052344508345

Date of advice: 10 February 2025

Ruling

Subject: GST - input tax credits

Issue 1

Non-assessable non-exempt income

Question 1

Are receipts relating to membership fees, and dinner fees considered non-assessable non-exempt (NANE) income under section 59-35 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes.

Issue 2

Assessable income

Question 2

Are receipts relating to guests' dinner fees considered to be assessable income under section 6-5 of the ITAA 1997?

Answer 2

Yes.

Issue 3

Deductibility of member and guest receipts

Question 3

Are expenses relating to member receipts such as catering and other general expenses deductible under section 8-1 of the ITAA 1997?

Answer 3

No.

Question 4

Are expenses relating to guests' receipts considered deductible under section 8-1 of the ITAA 1997?

Answer 4

Yes.

Issue 4

Members and guests' fees - whether a taxable supply

Question 5

Are The Club's supplies of the membership and the XX Club dinners (club dinners) taxable supplies under section 9-5 of the A New Tax (System Goods and Services Tax) Act 1999 (GST Act)?

Answer 5

Yes.

Issue 5

Input tax credits for expenses

Question 6

Are you entitled to claim input tax credits pursuant to section 11-20 of the GST Act for the expenses incurred by you in relation to providing your membership and XX club dinners?

Answer 6

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The Club operates as a not-for-profit organisation. It is not an endorsed charity that is registered with the Australian Charities and Not-for-Profits Commission, and it is not a gift-deductible entity.

Members attend dinner meetings which include a meal with a guest speaker presenting to them. Members are entitled to bring guests to the meetings. After paying a once-off joining fee, members pay an annual membership fee to join the organisation. The membership fee goes towards subsidising dinner fees for members, paying for speakers and general administration of the Club.

There is a dinner fee for members and a higher dinner fee for non-members. Dinner meetings require members to pay a fee which is partially subsidised by their membership fee, and non-member guests pay a slightly higher amount. The catering bill is priced per head and the expenses can be isolated to relate to the members in attendance. Other goods are not sold at the dinner meetings.

Apart from the regular meetings, an annual party is held. The dinner fee is the same for members and non-members, as members are encouraged to bring their spouses. The dinner is costed out per head and it can be determined the amount in relation to the non-members.

The Club incurs expenses including, but not limited to:

•                     catering for the dinners

•                     administration

•                     advertising

•                     accounting/audit

•                     various general expenses like software subscriptions, stationery and website maintenance.

The Club is based in and conducts their operations in Australia.

The Club's Constitution

The Company's constitution states its objects and activities. The Company's constitution prevents the distribution of income and profits to members during its operation and also applies this prohibition to surplus assets remaining upon winding up.

The Club's objects are set out in the Club Rules (the Constitution).

Objects

The Club is established for the objects and purposes contained in the Statement of Purposes filed in accordance with the Act and as they may be amended from time to time which are set out below:

•                     To provide a means by which members can meet together in a social atmosphere to promote and develop acquaintances.

•                     To provide an opportunity for members of the Club to be informed on matters of business, civic and social importance.

•                     To hold regular functions and meetings consistent with these purposes.

•                     To provide a means by which newcomers to the area, of the required status, may be introduced to their professional and business associates without undue delay.

•                     The Club shall be non-political and non-sectarian.

The source of the funds, and guest rules are found in the articles:

The funds of the Club shall be derived from entrance fees, annual subscriptions, donations and such other sources as the committee determines.

All members have the right to invite guests to meetings of the Club excepting the Annual General Meeting or a Special General Meeting provided that the number of guests per member per meeting shall be limited to one and further provided that no person shall attend more than two Club functions in any Club year as a guest.

Non-profit articles - Property and income of the Company

The Constitution includes the following winding up and non-profit:

Winding up

In the event of the winding up or the cancellation of the incorporation of the Club, the assets of the Club must be transferred to (a particular named not-for-profit entity) unless to do so would offend the principle of mutuality in which event the assets of the Club must be disposed of in accordance with the provisions of the Act.

Application of Club assets and income

The assets and income of the Club shall be applied solely in furtherance of its objects and no portion shall be distributed directly or indirectly to the members of the Club except as bona fide compensation for services rendered or expenses incurred on behalf of the Club.

The Club is not carried out for the profit or gain of its individual members. It is not an ACNC type of entity.

Club Memberships

The membership of the Club is divided into different categories:

•                     Ordinary members;

•                     Life members;

•                     Foundation members.

•                     The Club's Constitution provides:

•                     Life members

The committee shall have the power to transfer any member to Life Membership. A life member shall be entitled to all privileges of membership without paying the yearly subscription or any special payment for life membership.

Voting at general meetings

Under a particular article, a member has one vote only upon any question that arises at a general meeting.

Committee of management

An article of the Club's Constitution says:

•                     The affairs of the Club shall be managed by the committee of management.

Under an article, the committee shall consist of the officers of the Club, a minimum of three ordinary members, and the immediate past President.

The Club's Constitution states:

The officers of the Club shall be:

•                    a President

•                    a Vice President; and

•                    an Executive Officer.

Financial information

The information extracted from the financials and audit report was provided.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 subsection 6-5(1)

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 50-1

Income Tax Assessment Act 1997 section 50-5

Income Tax Assessment Act 1997 section 59-35

Income Tax Assessment Act 1997 subsection 995-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

A New Tax System (Goods and Services Tax) Act 1999 Division 38

A New Tax System (Goods and Services Tax) Act 1999 section 38-250

A New Tax System (Goods and Services Tax) Act 1999 Division 40

A New Tax System (Goods and Services Tax) Act 1999 section 40-160

Income Tax Rates Act 1986 section 23AA

Income Tax Rates Act 1986 subsection 23(2)

Reasons for decision

Issue 1

Non-assessable non-exempt income

Question 1

Are receipts relating to membership fees, and dinner fees considered non-assessable non-exempt (NANE) income under section 59-35 of the ITAA 1997?

Summary

Receipts relating to membership fees, and dinner fees area considered NANE for members but not the guests' fees. The guest fees are assessable.

Detailed reasoning

Section 6-5 provides that assessable income includes income according to ordinary concepts, which is called ordinary income. Section 6-10 of the ITAA 1997 provides that assessable income also includes statutory income (amounts included by provisions about assessable income).

Furthermore, section 6-15(3) of the ITAA 1997 states that if an amount is non-assessable non-exempt income, it is not assessable income.

With reference to mutual receipts, section 59-35 of the ITAA 1997 states:

An amount of * ordinary income of an entity is not assessable income and not * exempt income if:

(a)           the amount would be a mutual receipt, but for:

(i)            the entity's constituent document preventing the entity from making any * distribution,

(ii)            whether in money, property or otherwise, to its members; or

(iii)            the entity's constituent document providing for the entity to issue MCIs (within the

(iv)            meaning of the Corporations Act 2001) or to pay * dividends in respect of MCIs; or

(v)            the entity having issued one or more MCIs (within the meaning of the Corporations

(vi)            Act 2001) or having paid dividends in respect of one or more MCIs; and

(b)           apart from this section, the amount would be assessable income only because of section 6-5.

It follows that if the mutuality principle will apply to the receipts derived from mutual dealings between the Club and its members, the mutual receipts will be non-assessable, non-exempt income of the Club.

Whether a receipt is income depends upon its quality in the hands of the recipient (Scott v Federal Commissioner of Taxation (1966) 117 CLR 514).

The term income is not defined in the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997. In The Bohemians Club v The Acting Federal Commissioner of Taxation [1918] 24 CLR 334 (Bohemians Club), Griffith CJ stated at 337-338:

A man is not the source of his own income, though in another sense his exertions may be so described. A man's income consists of moneys derived from sources outside himself. Contributions made by a person for expenditure in his business or otherwise for his own benefit cannot be regarded as his income unless the Legislature expressly so declares.

The exposition by Griffith CJ has formed the basis of the principle of mutuality as it applies to Australia. As such, a receipt by a taxpayer will not have the quality of ordinary income if the mutuality principle applies to it.

The essence of the mutuality principle is that you cannot derive any gain, and therefore income, from dealings with yourself. The mutuality principle provides that where a number of people associate for a common purpose and contribute to a common fund in which they are all interested, any surplus of those contributions remaining after the fund has been applied to the common purpose that is then distributed to the contributors, is a return of funds and not income or profit (Social Credit Savings and Loans Society Ltd v Federal Commissioner of Taxation (1971) 125 CLR 560 (Savings and Loans)).

The mutuality principle was described succinctly by McTiernan J in Revesby Credit Union Cooperative Ltd v Federal Commissioner of Taxation (1965) 112 CLR 564 (Revesby Credit Union) at 574 to 575:

The principle of mutuality seems to me to be settled. Where a number of people contribute to a fund created and controlled by them for a common purpose any surplus paid to the contributors after the use of the fund for the common purpose is not income but is to be regarded as a mere repayment of the contributor's own money...Incorporation of the fund is not relevant...What is required is that the fund must have been created for the common purpose and owned or controlled wholly by the contributors. If it is owned or controlled by anyone else the principle cannot apply...Furthermore any contributions to the fund derived from sources other than the contributors' payments, such as interest from the investment of part of the fund, or income from a business activity conducted by the members, cannot be taken into account in computing the surplus...Also the cases establish that the principle cannot apply unless at any given point in time the contributors to the fund are identical with the beneficiaries of the distribution of the surplus.

Application of mutuality

A number of authorities have established the application of the mutuality principle in Australia. They include Bohemians Club, Revesby Credit Union, Savings and Loans, Sydney Water Board Employees Credit Union Ltd v FC of T (1973) 129 CLR 446; (1973) 4 ATR 157; 73 ATC 4129 (Sydney Water Board), Royal Automobile Club of Victoria (R.A.C.V). v FC of T (1973) 4 ATR 567; 73 ATC 4153 (RACV), and FC of T v Australian Music Traders Association (1990) 21 ATR 471; 90 ATC 4536 (Music Traders), Coleambally Irrigation Mutual Co-Operative Ltd v FC of T 2004 ATC 4835. Those factors relevant to the Club are discussed in turn below. It should be noted that 'except in the simplest cases, no single criterion was likely to be decisive' (RACV at 4157)

The principle of mutuality is not limited in its application to situations where a refund of surplus contributions is distributed to the contributors.

Particular contributions of members in a non-profit organisation will be mutual receipts if the following elements of mutuality are present:

•                     existence of a common fund controlled by the contributors for a common purpose

•                     identity between the contributors and the participants

•                     not in the nature of trade.

Common fund

For the principle of mutuality to apply there must be a common fund. It can be described as a fund established by contributors for a common purpose in which contributing members as a class have rights. The fund must be owned or controlled wholly by the contributors. If it is owned and controlled by anyone else the principle cannot apply.

In Sydney Water Board the taxpayer unsuccessfully argued that interest paid by borrowing members of the credit union constituted a common fund paid for the common purpose of enabling the credit union to meet its administrative and operating expenses, with any surplus refundable to borrower members. Interest paid was not maintained as a common fund in which the borrowing members as a class had any rights. Interest was paid by borrowers in discharge of their legal obligations and became part of the general funds of the credit union. It was not paid as a contribution to the mutual liabilities on behalf of the borrowers. Mason J. noted at page 4136 that the borrowing members did not have any right to a refund of part of the interest which they have paid; on the contrary:

...the interest so paid forms part of the funds of the taxpayer... the borrowing members are entitled to participate in a distribution of the surplus which results from the taxpayer's use of the general funds.

Common purpose

The existence of a common purpose shared by the members is an essential feature of a mutual arrangement. The common purpose underpins mutuality as members join together to contribute to a common fund, based on an estimate of expected expenses related to their common purpose, on the understanding that any surplus will be returned to them as contributors. Contributions for a common purpose need to be distinguished from payments for other purposes including those in a member's individual capacity.

The decision in Music Traders emphasised the importance of determining the purpose of the members making the payments in ascertaining whether those payments are to be characterised as contributions to a common fund. The exhibition fees paid by members participating in the trade fair were to secure individual exhibition space. The court held there was no common purpose, concluding that the music fair, in '...essence was that of trading for profit by individual traders, though the medium of a common activity, the fair'.

Identity between the contributors and the participators

Receipts can only be characterised as mutual where the contributors to the common fund and those who are entitled to participate in the surplus are from the same class of people. The principle of mutuality may be displaced where there is a difference of identity between those who contribute and those who can receive a distribution of surplus, or where the distribution of surplus is disproportionate to the amount contributed.

Originally, for mutuality to apply it was considered there had to be complete identity between those that contributed to the common fund and those that benefitted. This has changed overtime. In Sydney Water Board Mason J described the requirement of identity at page 4135 as follows:

Conformably with the original concept that the return of surplus funds is a refund to the contributors of their own money, it has been said that there must exist an 'identity' between the contributors and the participators. In Municipal Mutual Insurance Ltd v Hills (1931) 16 TC 430 at 448, Lord Macmillan said there must be a "complete identity". On other occasions it has been pointed out that the identity required is not an identity between individuals but an identity between classes (see The Social Credit Savings and Loans Society Ltd v FC of T at 4238). Again, with the same end in view...it has been said there must be "a reasonable relationship" between what a member contributes and what he may be expected or entitled to receive from the fund.

Sydney Water Board is an example in relation to loan contracts where there was a lack of identity between contributors and participators and therefore mutuality did not exist.

In contrast where the members who contribute retain ownership of the common fund and the activity is mutual '... the fact that some members only take advantage of the facilities available does not affect the element of mutuality' (RACV at 4157).

In Coleambally Irrigation Mutual Co-operative Ltd v FC of T 2004 ATC 4835 (Coleambally), the court found that where a constitution prohibits distribution to members on winding up, the connection between those who contributed to the common fund and those who participated in the common fund is broken so as to prevent the principle of mutuality from applying, Beaumont, Merkel and Hely JJ said at page 4842:

The identity required is not an identity between individuals, but an identity between classes, and all that is required is a reasonable relationship between what a member contributes, and the member's expected participation in the common fund: Sydney Water Board Employees Credit Union (supra) at ATC 4135; CLR 457; Social Credit Savings & Loans Society Ltd (supra) at ATC 4238-4239; CLR 571-572.

In response to the decision in Coleambally, section 59-35 of the ITAA 1997 was enacted to ensure that contributions from members to an entity (common fund) would not be subject to taxation, where the constituent document of the entity prevents the distribution of money or property to its members.

Section 59-35 of the ITAA 1997 operates to treat the contributions from members in such cases, as non-assessable, non-exempt income (NANE income). This has the effect that no provision in the ITAA 1936 or ITAA 1997 operates to treat the member contributions as assessable income.

Activities in the nature of trade

An entity's dealings with its members are not mutual by the mere existence of a membership. This exception to mutuality was best explained by Lord MacMillan in Inland Revenue Commissioners v Ayrshire Employers Mutual Insurance Association Ltd (1946) 1 All ER 637 at page 640 when he said:

It is not membership or non-membership which determines immunity from or liability to tax; it is the nature of the transactions.

There is a point at which the relationship of mutuality ends and that of trading begins. Lord Wilberforce in Fletcher v Income Tax Commissioner 1972 A.C.414 at page 421 stated:

So the issue is better framed as one question rather than two: is the activity, on the one hand, a trade, or an adventure in the nature of trade, producing a profit or is it, on the other, a mutual arrangement which, at most, gives rise to a surplus.

It is accepted that a corporation can make a taxable profit from its members even if it is limited to dealing with them. In English and Scottish Joint Co-operative Wholesale Society Ltd. v Commissioner of Agriculture Income-Tax, Assam [1948] 2 All ER 395; (1948) AC 405 involved (the Assam Tea case) involved a society incorporated in the UK of two members, an English co-op and a Scottish co-op. It owned an estate in Assam where it grew and manufactured tea, and, except for a small portion the tea was sold to its two members at market rates. Each year the members advanced to the society funds to meet the cost of tea to be supplied to them. The market price of the tea was debited against the advances and the supplies were recorded as sales to the members. Whilst it was not in dispute that there were mutual elements in the association, it was held that the sale of tea to the members of the association, who then on-sold, was a trading, not a mutual activity.

In the case Sydney Water Board it was held that the interest paid by individual members on borrowings from their credit union were not contributions by those members to a common fund, but simply the cost of obtaining their individual loans. Mason J when determining that the principle had no application to a credit union with borrowing and depositing members looked at the nature of the payments made by contributing members. He determined that the payment was made out of a legal obligation and not to meet a mutual liability. At page 4136 he stated:

Once attention is given to the relationship which exists between the taxpayer and its borrowing members (who, according to the argument, comprise the relevant class of contributors), and the nature of the transactions in which they engage, it is apparent that the mutuality principle has no application here. The taxpayer lends money to members under individual contracts of loan by which the borrowers are bound to pay the stipulated interest to the taxpayer for its benefit. Again, it borrows money from its members under individual contracts of loan by which it is bound to pay interest to them.

... The suggestion that the amount of interest paid in a particular year is the common fund is artificial for neither the taxpayer's rules, nor its accounts, nor its mode of conducting business lends any support to the suggestion or to the notion that it is a fund in which the borrowing members as a class have any rights. Indeed, the suggestion is at odds with the concept which underlies the objects of the credit union, that is, that a fund will be created from loans by members having money to lend at interest and that the fund will be lent at interest to members desiring loans.

In other important respects the circumstances do not come within the mutuality principle. Interest is paid by borrowers in discharge of a legal obligation to pay it; when paid it forms part of the general funds of the taxpayer to be dealt with as it thinks fit; payment by a borrower is not in any sense a pre-estimate of the amount which will be required to meet his proportion of mutual liabilities incurred on behalf of all borrowers; nor is interest paid on the footing that there will be a refund to the borrower of any part of the payment which is not required to meet mutual liabilities.

Mutuality will not apply where the trading is for profit. Each transaction requires careful examination. If the true nature of the arrangement amounts to the carrying on of a trading operation for profit, the mutuality principle will not apply to the proceeds of such dealings with members. Where there is an intention to make a profit from the arrangement rather than merely generate a surplus, the profits made will be subject to tax.

In Liverpool Corn Trade Association limited v Monks (HM Inspector of taxes) (1926) 2 KB110 (Liverpool Corn Trade) an incorporated association provided a corn exchange and other facilities for the purposes of trade. Both members and non-members could use the facilities. Members paid a subscription and were also charged for the use of the facilities proportionate to their use. Members were charged less than outsiders, and the bulk of the receipts were from members. The issue was whether the association made profits that were assessable. On considering the nature of the arrangement the court concluded there was trading for profit and mutuality did not apply. The trade was between the corporation and people who happened to be members.

The principle will not apply to activities that are considered in the nature of trade as opposed to a mutual activity. In North Ryde RSL Community Club Ltd v FC of T 2002 ATC 4293 the court stated:

... not all receipts by a club from members or from a third party on account of services or facilities made available to members are necessarily mutual receipts ... They may be no more than trading receipts. It is the nature of the actual transactions in question, and not the fact that a benefit was received or a service used by members that will determine whether receipts derived are liable to, or immune from, tax (at page 4306).

Application to your circumstances

The Club's Constitution provides that on dissolution any surplus property must be given to a company with similar objects. Section 59-35 of the ITAA 1997 will operate to prevent the member receipts as being treated as assessable income and will cause the member receipts to be treated as NANE.

All contributions of members related to membership and dinner are contributions for the common purpose and are NANE income of the Club. As such, member receipts will not be included in the assessable income of the entity under sections 6-5 or 6-10 of the ITAA 1997.

Issue 2

Assessable income

Question 2

Are receipts relating to guests' dinner fees considered to be assessable income under section 6-5 of the ITAA 1997?

Summary

Receipts relating to guests' dinner fees are assessable under section 6-5 of the ITAA 1997.

Detailed reasoning

Paragraph 3 of TD 1999/38 says that income from sources other than members is not mutual income, not subject to the principle of mutuality, and is fully assessable.

Guest dinner fees are not a mutual receipt and are assessable under section 6-5 of the ITAA 1997.

Issue 3

Question 3

Are expenses relating to member receipts such as catering and other general expenses deductible under section 8-1 of the ITAA 1997?

Summary

Expenses related to member receipts are not deductible under section 8-1 of the ITAA 1997.

Detailed reasoning

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing your assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

As member receipts and contributions are NANE income, all costs incurred to hold the Events are not deductible under section 8-1 of the ITAA 1997; they are not incurred in producing assessable income.

Question 4

Are expenses relating to guests' receipts considered deductible under section 8-1 of the ITAA 1997?

Summary

The expenses related to guests' receipts are deductible under section 8-1 of the ITAA 1997.

Detailed reasoning

As the guests' expenses are related to earning assessable income, where these can be identified separately from members' expenses, they will be deductible.

Issue 4

Members and guests' fees - whether a taxable supply

Question 5

Are the Club's supplies of the membership and the XX Club dinners (club dinners) taxable supplies under section 9-5 of the A New Tax (System Goods and Services Tax) Act 1999 (GST Act)?

Summary

The supplies of the annual membership and XX club dinner are not GST-free or input taxed supplies. Therefore, GST is payable on the Club's supplies as per section 9-5 of the GST Act.

Detailed reasoning

You must pay GST on any taxable supply you make. A supply is a taxable supply pursuant to section 9-5 of GST Act if:

(a)           you make the supply for *consideration; and

(b)           the supply is made in the course or furtherance of an enterprise that you *carry on; and

(c)           the supply is connected with the *indirect tax zone; and

(d)           you are *registered, or *required to be registered for GST.

However, a supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

The Club is registered for GST, and it makes supplies of the annual membership and XX club dinners for consideration in carrying on the enterprise in the indirect tax zone.[1]

Unless the annual memberships or XX club dinner comes within the definition of a GST-free or input taxed supply, the Club will satisfy the requirements of a taxable supply on which GST is payable.

Therefore, it must be considered whether the Club's supplies are, to any extent, GST-free or input taxed.

Input taxed supplies

Division 40 of the GST Act sets out those supplies that are input taxed. If a supply is input taxed, then:

•                     no GST is payable on your supply, and

•                     you have no entitlement to claim an input tax credit for anything acquired to make an input taxed supply.

Under section 40-160 of the GST Act, an endorsed charity, a gift deductible entity or a government school can choose to treat all supplies that it makes in connection with a fund-raising event treated as input taxed where certain requirements are met.

As the Club is not an endorsed charity, a gift deductible entity, or a government school, it does not satisfy paragraph 40-160(1)(a) of the GST Act, and therefore, section 40-160 of the GST Act cannot apply. As paragraph 40-160(1)(a) of the GST Act is not met, it has not been considered whether the XX club dinners are fund-raising events.

GST-free supplies

Division 38 of the GST Act sets out the supplies that are GST-free. If a supply is GST-free then:

•                     no GST is payable on your supply, and

•                     your entitlement to an input tax credit for anything acquired or imported to make the supply is not affected.

Although there are concessions under Division 38 of the GST Act for eligible entities, including for eligible entities making non-commercial activities under section 38-250 of the GST Act, because the Club is not an endorsed charity, a gift deductible entity, or a government school it is not entitled to apply these GST concessions.

Conclusion

Therefore, as the supplies of the annual membership and XX club dinner are not GST-free or input taxed supplies, the Club's supplies are taxable under section 9-5 of the GST Act. The GST is payable on the supplies.

Issue 5

Input tax credits for expenses

Question 6

Is the Club entitled to claim input tax credits pursuant to section 11-20 of the GST Act for the expenses incurred by it in relation to providing membership and XX club dinners?

Summary

The Club will be entitled to claim input tax credits for any creditable acquisitions it makes in connection with the club memberships and XX club dinners under section 11-20 of the GST Act.

Detailed reasoning

Section 11-20 of the GST Act provides that you are entitled to claim input tax credits for any creditable acquisition that you make.

Section 11-5 of the GST Act provides that you make a creditable acquisition if:

(a)           you acquire anything solely or partly for a *creditable purpose; and

(b)           the supply of the thing to you is a *taxable supply; and

(c)           you provide, or are liable to provide, *consideration for the supply; and

(d)           you are *registered or *required to be registered.

All the above requirements must be met for the acquisition to be a creditable acquisition.

Section 11-15 of the GST Act defines creditable purpose:

(1)           You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.

(2)           However, you do not acquire a thing for a creditable purpose to the extent that:

(a)           the acquisition relates to supplies that would be *input taxed; or

(b)           the acquisition is of a private or domestic nature.

Conclusion

In this case the Club is registered for GST. The Club has purchased, or will purchase, things such as catering for the XX dinners, administration services and expenses, advertising, accounting and auditing services, software subscriptions, stationery, and website maintenance. These acquisitions are, or will be, used by the Club entirely for the purpose of carrying on its enterprise. The acquisitions are creditable acquisitions made solely for a creditable purpose.

As the Club does not make input taxed supplies, none of its acquisitions would relate to making supplies that would be input taxed. The acquisitions are not of a private or domestic nature.

Therefore, the Club is making creditable acquisitions in connection with the memberships and the XX club dinners under section 11-5 of the GST Act and are entitled to claim input tax credits under section 11-20 of the GST Act. The Club must ensure that it holds a valid tax invoice before it claims input tax credits where the GST inclusive price of the acquisition exceeds $82.50.

[1] 'Indirect tax zone' is defined under section 195-1 of the GST Act to mean Australia but does not include external Territories and certain offshore areas.